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Problems of Some US Banks Pose No Direct Risks to Switzerland's Markets - Swiss National Bank

© East News / BARTOSZ KRUPASwiss National Bank
Swiss National Bank - Sputnik International, 1920, 16.03.2023
ZURICH (Sputnik) - The Swiss National Bank (SNB) and the country's Financial Market Supervisory Authority (FINMA) see no signs of "contagion" of Swiss financial institutions due to turmoil in the banking sector in the United States, the SNB said in a statement on Wednesday.
Earlier in the day, US media reported, citing sources familiar with the matter, that Swiss bank Credit Suisse requested Switzerland's Central Bank and FINMA support after a plunge in its shares by some 30%. The shares of Credit Suisse were down 24.2% to 1.7 Swiss francs ($1.82) per share at the close of the trading day on Wednesday and were down some 30% during the trading session.
"The Swiss National Bank SNB and the Swiss Financial Market Supervisory Authority FINMA assert that the problems of certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets," the statement says.
Regulation in Switzerland requires all banks to maintain capital and liquidity reserves that meet or exceed the minimum requirements of Basel standards, it explained.
"Furthermore, systemically important banks have to meet higher capital and liquidity requirements. This allows negative effects of major crises and shocks to be absorbed," the central bank added.
Credit Suisse’s capitalization and debt have been particularly affected by market reactions recently, it noted.
"FINMA is in very close contact with the bank and has access to all information relevant to supervisory law. Against this background, FINMA confirms that Credit Suisse meets the higher capital and liquidity requirements applicable to systemically important banks. In addition, the SNB will provide liquidity to the globally active bank if necessary. FINMA and the SNB are following developments very closely and are in close contact with the Federal Department of Finance to ensure financial stability," the statement says.
Credit Suisse welcomed the SNB's statement. "We welcome the statement of support issued by the Swiss National Bank and the Swiss Financial Market Supervisory Authority FINMA," Credit Suisse said on Twitter.
The bank already announced a 50 billion Swiss francs ($53.7 billion) loan from SNB to strengthen its liquidity and offers by Credit Suisse International to buy back debt securities for cash worth up to 3 billion Swiss francs.
"Credit Suisse is taking decisive action to pre-emptively strengthen its liquidity by intending to exercise its option to borrow from the Swiss National Bank (SNB) up to CHF 50 billion under a Covered Loan Facility as well as a short-term liquidity facility, which are fully collateralized by high quality assets. Credit Suisse also announces offers by Credit Suisse International to repurchase certain OpCo senior debt securities for cash of up to approximately CHF 3 billion," the bank said in a press release on the website.
On Friday, Californian regulators shut down Silicon Valley Bank (SVB), which became the largest US bank to collapse since the 2008 financial crisis. SVB's collapse is believed to be linked to the increase in interest rates by the Federal Reserve System, which caused the impairment of assets on the balance sheets of many financial institutions, and to poor risk management. On Sunday, authorities closed New York-based Signature Bank because of systemic risks; this was the third-largest bank failure in US history.
The crisis at Credit Suisse came into greater focus on Wednesday after its biggest shareholder Saudi National Bank responded with an emphatic "absolutely not" when asked if it was open to doing further cash injections into the Zurich-based investment bank.
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